Amazon, JPM, Berkshire form new company to tackle health costs

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Dive Brief:

Amazon, J.P. Morgan Chase and Berkshire Hathaway announced Tuesday they are forming an independent company to address healthcare needs of their U.S. employees "free from profit-making incentives and constraints."

The corporate giants gave scant details about the new venture in a joint press release, but said the initial focus will be technology solutions to provide their stateside employees with "high-quality and transparent healthcare at a reasonable cost."

The healthcare industry has been anticipating Amazon to make an entrance, potentially with great disruption to the status quo. The vague intentions of the new companies leave open many avenues but also invited skepticism in early reaction.

Dive Insight:

The short statement quotes the well-known company leaders, and all three discuss rising healthcare costs, with Berkshire Hathaway CEO Warren Buffett referring to the trend as a “hungry tapeworm on the American economy.”

Amazon CEO Jeff Bezos said the companies are aware their goals carry a high degree of difficulty. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort,” he said. “Success is going to require talented experts, a beginner’s mind and a long-term orientation."

Although government programs are the focus of many healthcare payer policies, but about half of Americans get coverage through their employer. As Larry Levitt, senior vice president at the Kaiser Family Foundation, noted, employers are key to success in bringing down overall healthcare costs.

Who knows what this Amazon-JPM-Berkshire health care thing really is. But, if it’s the start of getting big and influential employers engaged in health care costs, it could mean something. We won’t make progress on cost control without employers. https://t.co/jacbMLf8Wt

Lack of details and vague intentions of the new company spurred wariness among some analysts that a major change in the healthcare landscape is clearly in sight. The sheer size of the companies, however, means this deal will be one to keep an eye on.

Moody’s Vice President Mickey Chadha said in a statement the joint venture could be disruptive, given the new company’s resources. “However, considering the regulatory burden around every aspect of healthcare any new entrant in the space is at a huge disadvantage and companies like CVS, Walgreens, United Healthcare, Aetna and Express Scripts already have large scale which allows for better vendor and drug manufacturer contracting and the ability to serve national clients,” he said.

Amazon watchers have noted a few recent moves that indicated an interest in healthcare. Just last week, the company hired a physician who ran Iora Health’s clinics in Seattle. His role is still unknown, but he could be joining a stealth healthcare team. Amazon also recently had a job posting for a HIPAA compliance lead.

Late last year, Amazon filed with a number of state pharmaceutical regulators, but there is no clear idea of any intention to deliver medical supplies or pharmaceuticals. Amazon has also famously been shopping around for a location for its second headquarters. The list of potential sites has been narrowed to 20.